I feel like every newsletter in 2023 has ended with me saying “I hope we get more volatility next week”, and well… it's finally here!
I'm not an expert and have no informed opinion on what's going on with SVB and how it might affect the markets - all I know is I trade what the market gives me, and right now it's presenting some opportunities.
Facing possible assignment (again) in Walgreens
Trade update in Apple
Facing possible assignment (again) in WBA
Back on Feb 4 I sold a cash-secured put at the $35 strike in WBA for $54. The trade is expiring next Friday on Mar 17 and as you can see, the option is currently worth $181 - so the position is trading at a $127 loss. Because I already own WBA in my portfolio, I almost always have an open option position in the stock so that I can continually bring down my cost basis. In 2022 I had 9 different trades in WBA with realised profits of $1,013. In 2021, I had 8 trades with realised profits of $574.
Even though I could have taken this trade off for a credit earlier, I didn't because I'm open to getting assigned on this position, probably after I roll it out as much as possible. If I do get assigned eventually, this will bring my overall cost basis down to about $34 per share, which then gives me more flexibility to start selling covered calls or strangles against the stock again. This is why selling options can actually be used very conservatively and in a way that's complementary to a long term buy and hold position - by just slowly whittling away at the cost basis until you own stocks basically for free. Check out the link below for another recent trade in WBA.
Trade update in AAPL
So I shared the initial trade in my $140/145 AAPL put ratio spread last week and what I didn't say is that it was put on as part of my course, and the people taking part in the course voted on this trade being put on. It's turning out to be a really good vote because it's allowing me to teach a lot from how this position has been moving.
Last week this trade was a 100% winner, and now it's swung the other way and is only making 20% of max profit. The good thing is because of how a put ratio spread works, if AAPL goes down even further somewhere between $140 and $145, it'll swing back to making more than 100% of max profit, because of the intrinsic value that will kick in on the $145 put. Especially now that we're closing in on expiration with 20 days to go, extrinsic value is going to fall off a cliff. No matter what happens, it's been a great trade to follow along with to get the feel of how options move together with volatility and market conditions. You can read about the original trade entry in the link below.
That's it for this week. Even though the increase in volatility is welcome, this isn't the time to start going all in on anything.
We have yet to see how the whole SVB situation is going to shake out - so a risk-focused approach is how I'm approaching my portfolio right now.
This article is for educational purposes only. This is my own portfolio which is being managed according to my goals and risk tolerance. Your situation is likely different and you should do your own due diligence before investing in stocks or options.